In the five years at helm, Haseeb Drabu has brought up J&K Bank’s credit base in the state, brought down expenses and expanded the scope of banking. Besides, the state of J&K has benefited much more, since it discovered the economist. Haroon Mirani reports.

Dr Haseeb Drabu
Dr Haseeb Drabu

This week, Dr Haseeb Drabu completed five years as the chairman of the J&K Bank, unarguably the biggest profitable state owned entity. The only listed company from J&K has always been a prized entity in the state, way before Drabu took it over in 2005.

He was then the economic advisor to the PDP led coalition government, and the bank’s command made him the ultimate financial planner for the next few years in the state. His interventions in the bank, as well as in the state were unprecedented, that bore equally impressive results.  What some experts describe as his biggest contribution is the credit off take of the bank in the state itself.

In five years, J&K bank has raised its credit  deposit ratio in the state from a less than 20 percent to more than 50 percent, which translates into a credit of Rs 12,000 crore – a ten time growth from Rs 1200 crore five years ago. Initiatives like common service centres named the Khidmat centres have raised the bank position from a mere banker to the state to its effective partner in development. The project is a win win for the bank, the state, and the people its caters to.

Drabu believes the strength and stability of a bank is more important. “World’s most reputed bank is the Bundesbank because it is strong. Growth is a subsidiary thing,” he said.

Business strategy and credit availability

Soon after taking over as the chairman, Drabu made some policy changes in the bank. He pursued an inward growth strategy and literally put a stop on the bank’s expansion outside J&K. “In Mumbai I had to pay huge amount to open a branch but here I can open five branches with that money and the business yield will also be much higher,” Drabu explains.

On credit off take to J&K from Rs 1200 crore Rs 12000 crores, Drabu says, “Making credit availability to the residents of J&K is only way to their financial empowerment.”

With business growing in J&K, it now accounts for 50 percent of the bank’s total business. Earlier it was a mere 20 percent. “When I lend here, it generates economic growth in the state,” said Drabu. “The financial intermediation has been hugely successful.”

“Five years ago the average yield on advances in J&K was 14 per cent and outside J&K it was 7 per cent. Today it is 12.5 in J&K and 10.5 outside J&K,” said Drabu. “The 2% higher margin is due to high risk factor here and high transaction costs.”

The credit off-take hasn’t been a simple story of raising the bar, it has often involved strategy changes and customizing products to local needs. “Earlier we used to lend money against assets but now we are lending against business; that is making a huge difference,” said Drabu.

The bank has introduced a number of products aimed at a vast majority of illiterate class like artisans and craftsmen. “They get their money when they sell a shawl or carpet,” said Drabu. “So we made the product keeping in view their requirements otherwise they were not availing loans.”

Khidmat centres

Khidmat centres have also been a success story of J&K bank under Drabu.  When the scheme under national e-governance project was launched to establish CSCs (common service centres) across India in 2006 in private public partnership mode, J&K remained aloof  due to red-tapism. In 2009, J&K Bank sought a mandate from the state government and approached union IT ministry and became the only bank in India to get permission for its implementation. “We started with eight people in May 2009, and now 300 centres are up and running in nine of the 22 districts across J&K,” said Drabu.

The bank named the CSCs, Khidmat Centres and branded the stores to give a uniform look and feel. Now the RBI has allowed the centres to carry out banking transactions.

“It is an alternative delivery mechanism for financial services which leverages the strength of the existing formal financial channels even as it retains the reach and method of informal finance,” said Drabu. RBI, he said, acknowledged the low level of financial intermediation and provided an opportunity that will help in 100 percent financial inclusion.

Of J&K bank’s 536 branches over 424 operate from J&K. The 1109 Khidmat centres serving as additional counters will expand its footprint. “CSCs would start with using biometric machines to accept and dispense cash followed by taking over government’s social security operations.” CSCs will surge in numbers to 4300 by 2013 as the central government intends to dovetail the implementation of all the rural development schemes into the CSCs.

The scheme fits in the planning of Dr Drabu who in last five years has been creating a new financial architecture of the state. “In next three to five years we are looking at a scenario in which you will have core banking of the state with the J&K Bank and all other financial services with its subsidiary J&K Bank Financial Services Ltd,” said Drabu. These will include CSC as well. Bank has already bought one percent stake in the National e-governance Company.

Forthright advisor

If Drabu’s contributions in the state were limited to the J&K Bank, it would only have been a successful corporate tale. But coming from a long stint in the Planning commission, Drabu had a bigger role to play in the state’s economic planning.

When the NDA government announced a 2600 crore rupees annual plan  for the state. Drabu was almost the only one to oppose. “The package will yield nothing and only magnify state’s pampered image outside,” Drabu had said.
So he shot a letter to Planning Commission opposing Rs 2600-crore package and asking for only Rs 2400 crore. Prime Ministers Office and planning commission were both perturbed and surprised.

Planning Commission or the PMO were used to receive demands for hike in the plan, but this was the first time that a state government was seeking a reduction!

After many rounds of negotiations Drabu won his way. “I told them just give me Rs 2400 crore which I can finance and not the plan which is just big as to satisfy the egos only,” said Drabu.

The process of fiscal management, which he introduced, is seen as one of the few good things that happened to Kashmir economy in a long time. Renowned economist Dr. C Rangarajan termed it as the best example of fiscal management where you don’t look for a big plan but for a more relevant realistic capital plan.

Zero deficit budgeting

Drabu convinced the government to implement the principle of zero deficit budget, the absence of which, he says, was the source of all of the state’s financial problems, including the overdraft from J&K bank.

The state budget would show, for example, total revenues of Rs 3,000 crore and expenditure as Rs 3,500 crores. How and where from would Rs 500 crore come from was never identified. Invariably the plan would be underfinanced.

The problem was so huge that its only solution would have been to print notes, as such kind of deficit can only be held by independent countries who have an independent monetary authority. “There were unidentified gaps. We can’t print notes and somewhere somebody has to finance it,” said Drabu.

The unfunded financing gaps created in the state’s finances were leading it towards a big mess. “I simply brought in certain principles in the budgeting setup wherein you cannot leave financing gaps,” said Drabu. “We can, and have, fiscal and revenue deficits, for which we borrow but not budgetary deficit which needs money to print which we can’t.”

The present government, despite much noise made against it earlier, has continued the practice of zero budget deficit, which otherwise, Drabu says, would have taken decades to balance the amounts.

Plan Restructuring

The normal technical principle of planning accepted worldwide and in India is that committed liabilities (salary etc) from one plan have to be moved to next plan as non-plan. But J&K had ignored it for the last 20 years resulting in huge committed liabilities which were into the plans.

The committed liabilities would eat up as much as Rs 2500 crore of the state’s Rs 4000 crore plan reducing the actual plan to just Rs 1500 crore. “We restructured the entire plan taking out committed liabilities from it and putting it into non-plan so that plan becomes a neater, cleaner plan,” said Drabu. “Capital plan without salaries was huge restructuring. Very few states have done it.”

The plan restructuring, Drabu says, has long term benefits, which would pay off in next couple of years as the liabilities were huge.

Loan Book


The much talked about Prime Minister’s Reconstruction Plan (PMRP) is also the brainchild of Drabu, who was perturbed by the plethora of previous packages which yielded nothing substantial. “Jammu and Kashmir had a completely shattered economy where normal annual plans won’t work,” says Drabu. “Though the money was coming it was not put together in a certain manner.”
Drabu suggested the government to reduce the dependence on different flows which are very adhoc as they sometimes come and sometimes don’t. “Most of the time commitments were made but they were not backed by budgetary resources and central government,” said Drabu.

He drafted a new plan which envisaged putting together all the resources. It was called as reconstruction plan. The state’s chief minister, chief secretary, financial commissioner and Drabu went to prime minister and gave the presentation of the plan valuing about Rs 6,400 crore. They also roped in Planning Commission and discussed it with various agencies.

To their surprise when PM came to Kashmir he announced a package of Rs 24000 crore, wherein additional Rs 18000 crores were added for power. “We got the 6000 crore package what we had asked for,” said Drabu. “There were three things in it which made it unique. First it was earmarked resources as the money was earmarked in budget in various ministries. Second it meant for specific projects on a specific understanding. And third the normal plan and financing was already tied up.”

For implementation of the PMRP, Drabu proposed creating an Economic Reconstruction Agency.

Drabu is happy that the package has at least delivered something on ground. “It was meant for building of roads, bridges, urban sewerage, rural sewerage etc and we have achieved something,” said Drabu. “On its part central government has achieved nothing on its 18000 crore power grant.”

The central government is now mulling PMRP 2, recommended by Rangarajan committee of which Drabu is also a member.

Toll Tax and Land Revenue

One of the more mundane ways of managing our economy was the toll tax and land revenue. J&K was, probably, the only place which taxed its exports. Drabu pushed for the abolition of these levies. “With the abolition of this tax on horticulture produce particularly apple, every grower in the state gets benefitted by 1 to 2 lakh rupees.”
The move has also made the industry more profitable and competitive.

Land revenue was also the same genre of taxes which were more harmful than beneficial. The state spent more money on collecting than what it actually collected. “It was a sort of a symbolic thing and not much was garnered,” said Drabu. Ultimately it was also banished, giving people a relief and relieving the government of an unwanted burden. “These were two policy decisions whose benefits were felt across the state,” said Drabu.

Chenab valley Power Projects

Drabu does not hide his displeasure when confronted with the argument that Kashmir was losing immensely due to Indus Water Treaty (IWT). “I am sick of the excuse invented by people that they suffer losses due to IWT,” said Drabu. “I say what if there was no IWT, we still could have not done anything with the available due to our own deficiencies.”

He says we would face the constraint only if we had exploited 20,000 MW of potential and faced problems in exploiting further 5000 MW. “It may be a political problem but not a business problem,” said Drabu. “We have exploited just 900 MW and the potential is 25000 MW, then where is the constraint.”

Stock-wise advances (2009)

Drabu identifies three deficiencies which hinder the state in exploiting its water resources. First, the finances; second, private investor; and third, the knowledge deficit.  For tackling these problems he had suggested taking PDC public in a two stage process.

Drabu had recommended divesting 10 percent of PDC to a well known company on a negotiated basis at the best value in stage one. “Once the company gets 10 percent share, they will fill our knowledge deficit by transferring skills, manpower etc,” said Drabu. “In stage 2 we have to ensure maintenance of the project because we don’t have skills for that, as was proven by the transfer of Baghlihar to NHPC.”

The ideal situation is to go for a joint venture but that has to encounter lot of legal and other problems. In order to overcome it Drabu had suggested basin basis paradigm of development, to exploit the hydro power potential of major three basins of Chenab, Indus and Jhelum. “I suggested company on a basin basis and first one for our biggest basin of Chenab,” said Drabu. “So I advocated JV with NHPC that looks after Chenab basin-Chenab Valley Power Projects Limited.”

Drabu says the move was to reclaim some of the ground that was already lost due to transfer of nine projects to NHPC. “It was agreed in principle that chairman would be from J&K. Besides NHPC is India’s biggest company and it will raise valuation of PDC,” said Drabu. “If I lost something in name, I would have gained much more in valuation especially because too PDC will be the owner of CVPP’s.”

Drabu says that nuances of the agreement can be debated but not the principle and it was the best way to do it.
“We agreed that 51 percent share should have gone to PDC and later we agreed also to 49, 49 to two parties and two percent J&K bank,” said Drabu. “But then it loses its status as NHPC project due to a central government legislation.” So it did not materialise. Eventually the two percent went to Power Trading Corporation- a government of India entity.

The agreement had also agreed on the nature of manpower, employment and other things. Regarding the controversy around agreement with NHPC over the issue of ownership. “There is also a clause of buyback so in the future we can even buyback our shares, so we have lost nothing,” said Drabu.

He had suggested three types of models. First was Chenab Valley Power Projects (CVPP), second was Baghlihar type execution of projects and third was clean privatisation like in GVK. “All the three can be then combined to build a base and this is the most valuable way to fast track our development of power sector.”


In 1996 companies from Norway, Germany, Austria, Vienna and other had come with a proposal to build a 600 MW power project at the cost of Rs 7000 crore in the Chenab basin.

In PDP government a review committee was formed to look into the project. The review committee was chaired by Haseeb Drabu and consisted of chief secretary, power secretary, financial secretary and planning secretary as its members. which renegotiated the entire deal in favour of the state. “We revised the project at the cost of Rs 7200 crores for 1200 MW,” said Drabu. “The cost per MW of power came down to Rs 6 crore per MW.”

But the project has been mired in controversy ever since. Mufti Syed didn’t bring the project before his cabinet due to some differences. Ghulam Nabi Azad passed it in his cabinet but the same was cancelled within seven days. The Norewegian consortium went to court and now have won the case.

Drabu thinks that the Sawlakote project is one of the best projects for Jammu and Kashmir in every way. “If Baghlihar has the cost of Rs 13 crore per MW, Sawlkote reduced it to just Rs 6 crore per MW,” said Drabu.

Kishtwar Tunnel

The J&K bank has been actively funding infrastructure projects. The bank undertook an important step of linking Kashmir valley with the Doda region via Kishtwar tunnel. The bank submitted a proposal to the government for building the tunnel.

The fertile area with huge potential in agriculture, horticulture, hydropower and other sectors has remained underdeveloped because of its inaccessibility.

“The tunnel will open up the entire area of Marwah, Wadwan, Doda and Kishtwar to Kashmir valley,” said Drabu. “It will also become a commercial route.”

The chief minister has indicated that they want to go with the project. “As soon we get the green signal we will bring in the investor builder and start the work,” said Drabu.

Heritage Preservation

Under Drabu, J&K Bank has played an active role in heritage preservation.“We have lost a lot of our precious heritage due to Ignorance, civil strife and lack of aesthetic sense,” said Drabu. “We are intervening in a different manner to stop or slow the decline.”

Bank has been generously using depiction of arts and crafts of Kashmir in its stationary. Drabu calls it intervention as a cultural civil society of J&K.

They have also plans to set up a gallery and museum at Poloview, Srinagar, wherein artefacts of historical importance will be displayed. “We have acquired a 300 year old Kani Shawl and other such artefacts. They will be displayed there,” said Drabu. “This priceless and rare heritage of Kashmir will be with an institution that will outlive all of us.”

To revive and take pride in our own culture and heritage is very important. “Get some sense of history and take pride in it,” says Drabu.

Drabu terms passion and patriotism as main requirements for getting desired results.


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